• Audere Research

Weekly FX Outlook July 26th


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GB Pound


Sterling slips on COVID-19 concerns before recovering.


Movements

GBPUSD opened at 1.3726 and kept moving lower during the first part of the week, dropping to a 5-month low at 1.3572 on Tuesday. It then paired all losses in the following trading sessions, closing slightly higher at 1.3748 (+0.16%).


GBPEUR opened at 1.1645 and initially depreciated, touching a 1-month low at 1.1532 before recovering and closing at 1.1670 (+0.22%).


Movement rationale

It was another poor start of the week for the Sterling, with the Pound taking a hit as the Delta variant continued to advance throughout the UK, with infection numbers rising to levels not seen since the worst of the second wave back in January. Also, the rising tension with EU about the Northern Ireland protocol which was agreed as part of the Brexit trade deal, added further pressure to the UK currency, touching two and five month lows versus the Euro and Dollar respectively on Tuesday. Some calm was re-established in the second part of the week, with Sterling rallying and recouping its losses, as there were some encouraging news regarding daily rates of infection, which seems to be waning after peaking at 54,205 on July 17th. To provide some extra relief to the GBP, strong retail sales figures for June were released on Friday (0.5% growth against expectations of -0.2%).


Week ahead

A light UK economic data calendar includes the following:


Calendar

Wednesday 3pm | Nationwide Housing Prices


US Dollar


The Dollar had a volatile week.


Movements

EURUSD began the week at 1.1787 and traded in a tight range (1.1750-1.1825) to close broadly unchanged at 1.1779.


GBPUSD opened at 1.3726 and kept moving lower during the first part of the week, dropping to a 5-month low at 1.3572 on Tuesday. It then paired all losses in the following trading sessions, closing slightly higher at 1.3748 (+0.16%).


Movement rationale

Investor sentiment, driven by concerns around the Delta variant, dominated last week’s currency prices, with several volatile sessions for the Dollar, which moved in accordance to shifting risk appetite. Rising coronavirus cases and fears that higher inflation may force the Federal reserve to raise rates sooner than currently expected kept the USD in demand during the first part of the week. This pushed the Bloomberg Dollar Spot Index to its highest levels since early April. The Greenback then lost momentum as market sentiment improved and investors booked profits ahead of month-end. Some mixed economic data was also released on Friday, with US business activity growing at a moderate pace for a second straight month, indicating a cooling in economic activity.


Week ahead

The US economic calendar including the following:


Calendar

Tuesday 3:30pm | Durable Goods Orders (Jun), Consumer Confidence (Jul)

Wednesday 7pm | Fed Interest Rate Decision

Thursday 1:30pm | Gross Domestic Product (Q2), Initial Jobless Claims (Jul 23)

Friday 3pm | Michigan Consumer Sentiment Index (Jul)


Euro


The Euro remains under pressure after the ECB meeting.


Movements

EURUSD began the week at 1.1787 and traded in a tight range (1.1750-1.1825) to close broadly unchanged at 1.1779.


GBPEUR opened at 1.1645 and initially depreciated, touching a 1-month low at 1.1532 before recovering and closing at 1.1670 (+0.22%).


Movement rationale

With limited economic data in the Eurozone, all eyes were on the ECB interest rate decision last Thursday. The central bank kept rates on hold and made no changes to the Pandemic Emergency Purchase Programme, triggering some losses for the Euro as investors digested ECB chief Christine Lagarde’s dovish statement. The single currency was also negatively affected by some resurgence in coronavirus cases in the Eurozone, with a notable jump seen in France, the bloc’s second largest economy. Some support for the currency was provided by PMI numbers, showing that Eurozone businesses have reported their fastest expansion in activity for more than two decades.


Week ahead

The Eurozone economic data calendar includes the following:


Calendar

Monday 9am | IFO – German Business Climate (Jul)

Thursday 1:30pm | Consumer Confidence (Jul), Economic Sentiment Indicator (Jul)

Friday 3pm | Gross Domestic Product (Q2), Unemployment Rate (Jun)


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